New formula for calculating electricity tariffs to reduce volatility
The cost of electricity in Singapore is expected to be less volatile and more reflective of current oil prices with a revision in the tariff formula.
The revision was announced by the Senior Minister of State for Trade and Industry, S Iswaran, in Parliament on Monday.
Instead of using the fuel oil price in the first month of the previous quarter to set tariffs for the current quarter - that is, using October oil prices to set rates for the January-March quarter - the Energy Market Authority (EMA) will use the average of fuel oil prices in the preceding three months to determine the tariff for the current quarter. That means using the average October to December oil price to set tariffs for the January-March quarter.
Mr Iswaran said: "The new approach has two advantages. First, it'll help reduce the volatility of the electricity tariff by averaging fuel oil prices over a longer time.
"Second, with a 3-month average, more recent fuel price data will be used to determine tariff. This will allow the tariff to be more reflective of the prevailing market prices of fuel."
If the new formula were to be applied to the fourth quarter of last year, the EMA said, tariff rates would have gone up by only 12 per cent instead of 21 per cent.
The EMA will apply the revised formula starting the third quarter of this year. Other measures to keep electricity rates low is to introduce more competition into the domestic energy sector.
One idea the EMA is exploring is for power generation companies to bid for a portion of the domestic electricity load on a competitive basis. The EMA expects to complete a detailed study of this proposal by the end of this year.
Mr Iswaran said Singapore is vulnerable to volatility in global energy prices as the country imports virtually all its energy supplies.
He added consumers can expect a further reduction of tariffs in April for the second quarter in tandem with global fuel prices. CNA/ir
